New character in Microsoft drama

CBS.MarketWatch.com

WASHINGTON (CBS.MW) -- Two weeks after the judge in the case branded Microsoft as a monopolistic predator, a new character taking the stage in the drama re-opens the window to getting the company and the government to hammer out a long-elusive settlement.

Judge Richard Posner

While the appointment of mediator Richard Posner doesn't guarantee a negotiated end to the landmark dispute, he may find a way to bridge the two sides' differences. That possibility is seen as a positive by many investors, who bid up Microsoft's stock
MSFT, -0.71%
in after-hours trading following the news of Posner's appointment. See Indications.

Posner, the chief judge of the U.S. Seventh Circuit Court of Appeals in Chicago, was named on Friday to bring the parties together despite many failed attempts over the past year to avert a court-ordered resolution of the antitrust charges against Microsoft.

Meetings coming up

The trial will move onto the next phase while any settlement talks take place. Judge Thomas Penfield Jackson, who is presiding over the case in the U.S. District Court of Washington, has ordered both sides to file written briefs explaining how to apply antitrust laws to his Nov. 5 findings of fact. He has also set oral arguments for Feb. 22, making a final judgment likely by March or April if no settlement is reached.

Jackson left the scheduling of any meetings up to Posner, who has yet to make arrangements to meet with the parties.

The appointment of Posner, a respected but controversial judge, raised eyebrows among observers of the year-long Microsoft case. A leading exponent of the Chicago school of economics, which advocates a stringently free-market economic analysis of legal issues, Posner is an influential authority on antitrust law. See profile.

Antitrust experts said Posner would be unlikely to advocate a break-up of Microsoft or major divestitures if he believes the company violated antitrust laws. But as a mediator, Posner will have no power to enforce a judgment on the government or Microsoft.

Both parties in the case welcomed his appointment. Justice Department spokeswoman Gina Talamona said the government viewed Posner as "a highly respected jurist." The Justice Department is eager to meet with Posner to "discuss the serious competitive problems identified in the court's findings of fact," Talamona said. "The department has always been willing to seek a settlement that would promote competition, innovation and consumer choice."

Microsoft spokesman Mark Murray said the company viewed Posner's appointment as "potentially a very positive step toward possibly resolving this case. We look forward to working with Judge Posner to try to reach a fair and responsible solution."

"It's a very interesting choice. Posner's strength clearly is that he is an expert on antitrust law. And he clearly has a point of view," said George S. Cary, a Washington antitrust lawyer and a former Federal Trade Commission official.

"There's no more fertile, creative or sophisticated mind in the law today than Richard Posner," said Albert Foer, president of the American Antitrust Institute, a Washington-based think tank.

'Chicago type'

But Foer, whose organization advocates a more aggressive antitrust agenda, worried that Posner is "very conservative and too much of a Chicago type."

Other Microsoft critics were more blunt. "He's an apologist for monopolists," said James Love, director of the Consumer Project on Technology.

But Love suggested Jackson may be attempting to shore up the likelihood any subsequent rulings will pass muster with the U.S. District Court of Appeals if there is no settlement. The appeals court has overruled Jackson before on Microsoft-related matters.

"Jackson may be trying to position himself for the appeal. Posner is a god to the appeals court. By appointing Posner, it kind of rubs off on Jackson," Love said.

Robert H. Lande, a law professor at the University of Baltimore, said selection of Posner. "It was a shrewd move by the judge to pick a respected conservative like Posner," Lande said.

While Posner tends toward conservative positions, he also believes in enforcing antitrust laws, Lande said. With that in mind, it will be difficult for Microsoft to reject a mediated solution if even Posner believes the software giant broke the law, Lande said.

Two-phase verdict

Jackson's decision to split the verdict into a two-phase process was viewed as an effort to encourage a settlement. However, the one-sided findings, which appear to make a judgment against Microsoft nearly inevitable, were seen creating more difficulty for the two sides to find common ground.

In remarks earlier this week on ABC's "Good Morning America," Microsoft Chairman Bill Gates said the company would be willing to sit and discuss "any sort of resolution that could come along."

But, at the same time, Gates and other company officials have given every indication that the company's Windows operating system remains sacrosanct. The government's case centered in large part on Microsoft's decision to tie its Internet Explorer browser into Windows, describing the move as an anti-competitive effort to sideline Netscape's rival browser.

In remarks to shareholders last week, Gates said limitations on what Microsoft can add to Windows would rob the company of the ability to define its own product -- limitations "no company should accept ... on their ability to innovate."

In another surprise move, Jackson appointed Harvard law professor Lawrence Lessig to serve as his amicus curiae, or friend of the court adviser, on the case. A previous attempt by Jackson to appoint Lessig as a "special master" to examine technical issues was successfully challenged by Microsoft, which accused Lessig of bias.

Jackson also invited the Justice Department and Microsoft to each designate an amicus curiae of their own choosing. The 19 states that have joined the Justice Department in the suit can also choose a single amicus curiae.

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